Adjustments which are necessary because cash for expenses is paid in advance or cash from income is received before the provision of goods or services are called:
A) deferrals/prepayments.
B) accruals.
C) temporary adjustments.
D) recorded adjustments.

Question

Quizplus · Accepted Answer

Deferrals or prepayments are adjustments made to account for expenses that have been paid in advance or for income that has been received before goods or services have been provided. These adjustments ensure that expenses and revenues are recognized in the appropriate accounting period. Accruals, on the other hand, are adjustments made for expenses that have been incurred but not yet paid or for revenues that have been earned but not yet received. Temporary adjustments and recorded adjustments are not common accounting terms.

Adjustments Which Are Necessary Because Cash for Expenses Is Paid